ICICI Bank’s Transformation

Hello, fellow Olio enthusiasts! 👋

Happy Hump Day and welcome to the 34th edition of Weekly Olio - your weekly dose of giggles, wisdom, and a sprinkle of intrigue with our tantalizing thought piece (yes, we're talking about Publisher's Parmesan here). 🤭

A big shoutout to all of you for the fantastic support and feedback. Let's keep the momentum going in the days and weeks ahead! 😊

Today’s Publisher’s Parmesan talks about how ICICI Bank is transforming banking through tech infusion while analysing if that’s enough or if more needs to be done.

For context, ICICI Bank Limited is an Indian multinational bank and financial services company headquartered in Mumbai. It offers a wide range of banking products and financial services for corporate and retail customers through a variety of delivery channels and specialized subsidiaries in the areas of investment banking, life, non-life insurance, venture capital and asset management.

Exciting, right? 👏

Will come to that, but let’s first start with the curation.

Oh, and before you continue, it's time for some sponsor spotlight! Don't worry, it's not clickbait, it's just our way of 'feeling the ad-vantage'. So, do click, and help us keep the lights on and the puns rolling! 😀

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The Quote󠀢 💭

The Tweet 🐦

When interest rates were zero, startup playbooks encouraged growth at all costs fuelled by heavy discounts/ cashbacks. As a result, most startups did not really get a handle on their costs until it was too late. With low-cost capital drying up, the post-2008 cohort of founders and operators is being forced to take a crash course in cost reduction. A great primer on the basics of costing.

The Infographic 💹

"Cha" and "te" are two distinct terms in the Chinese language that refer to the beverage known as tea. When the drink was introduced to different regions, the terminology varied depending on the contact method:

• Through the Silk Road, it became known as "cha"

• Via sea shipping routes, particularly with the involvement of Dutch traders, it was referred to as "tea"

Guess, what? Starbucks really need to work on renaming one of its products - Chai Tea Latte 😅😅

The Short Read 📝

The dawn of the superstar lawyer - by Financial Times

For a long time, the legal profession has been dominated by the so-called Magic Circle firms - a set of five London headquartered law firms. These firms represent blue-chip companies and fresh graduates from the world’s top law schools scramble to join them as Associates. Becoming a partner at one of these firms is considered the pinnacle of the legal industry. Traditionally, these firms have prized seniority with more senior partners taking home a bigger share of profits - a model known as lockstep. But that seems to be changing.

As superstar lawyers command salaries rivalling sports stars, firms are finding it hard to retain top talent with the lockstep model. Tired of having their earnings capped because of seniority, top lawyers are willing to switch firms. Some firms are even willing to let go of the traditional lock-step model in favour of letting their top rainmakers earn more. Fascinating read on the inside workings of a relatively opaque industry.

The Long Read 📜

How did Flipkart convince Indians to buy online?- by The India Notes

Flipkart is India’s largest home-grown e-commerce player. Even though it is the largest, it was not the first. This interview with Flipkart’s former head of product dives into the early days of the company and explores the problems solved when very few Indians had access to the internet and even fewer transacted online. In 2014-15, when Flipkart was evolving from an online bookseller to an all-purpose e-commerce store, 2G internet was still dominant and most users used Flipkart to purchase low-ticket items. It started to change in 2015 when Flipkart announced an exclusive partnership with Motorola to sell Moto G online. Suddenly, people were comfortable ordering a phone online and receiving it in a day or two.

The launch of Jio added more fuel to the fire with millions of Indians getting access to high-speed mobile internet for the first time. Flipkart’s partnerships with Xiaomi and Motorola were critical in driving sales of high-ticket items.

Building trust while purchasing online was important and Flipkart did interesting things to build that trust. One such example is the setting up of an outbound support team. On the Flipkart website, customers could enter their phone number and someone from the customer support team would call these customers to address their queries. This human interaction helped build trust especially when selling high-ticket items.

The interview is peppered with insights into how Indian consumers behave online. While some of this has changed but some of the lessons are true even today - especially if you are building for the bottom of the pyramid.

This week’s Publisher Parmesan is sponsored by Blinkist.

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Publisher’s Parmesan 🧀

ICICI Bank’s Transformation

ICICI Bank is making rapid strides towards becoming a tech bank by expanding its digital offerings for retail, MSME and corporate customers. It has covered a lot of ground but there's still a long way to go.

In early 2020, just before the Covid-19 pandemic disrupted the world, ICICI Bank's top 100 executives gathered for an offsite event centred around the theme of #2025. This event took place at a time when ICICI Bank, India's second-largest private lender in terms of assets, was facing uncertainty. With Sandeep Bakhshi having assumed the role of MD & CEO only 15 months prior, there was a need to address the bank's future direction. Despite the prevailing uncertainty, the top management of ICICI Bank presented a clear directive to its executives: anticipate and envision the demands that customers would have from the bank by the year 2025.

The offsite retreat highlighted ICICI Bank's strong digital capabilities, with fully digital channels and analytics infrastructure, extensive use of digital tools by employees, and a customer base that embraced technology. However, a significant challenge arose: how could the bank effectively meet customers' ever-changing expectations for immediate gratification, contactless banking, and minimal wait times? The solution was clear: technology.

ICICI Bank's ongoing technological transformation has yielded significant benefits, validating its strategic direction. Since Sandeep Bakhshi assumed the position of MD & CEO, the bank has experienced substantial growth. Net profit has skyrocketed by over seven times, showcasing the bank's improved financial performance. Moreover, there has been a notable increase in the proportion of safe and secure retail assets, rising from 45.5% to 52.9%. This shift indicates a strategic focus on cultivating a more stable asset base.

Furthermore, ICICI Bank has successfully managed its net non-performing assets (NPA), achieving a remarkable decline from 4.8% to less than 1%. This achievement reflects the bank's effective risk management practices and proactive measures to mitigate NPAs. The bank's diligent efforts have resulted in the development of a strong balance sheet, characterized by a healthy provisioning ratio and robust capital adequacy.

Despite a marginal slip, ICICI Bank has maintained its share of low-cost current account and savings account deposits, which currently stands at 44.5%. This accomplishment demonstrates the bank's ability to retain a significant portion of its customer deposits, indicating customer loyalty and trust in the institution.

Undoubtedly, technology has become a significant focus area for ICICI Bank, as evident from its increased investment in this domain. The bank's allocation of funds towards technology has risen from 5.6% of its operating expenses three years ago to 9.1% in the first half of FY23. This substantial increase highlights ICICI Bank's commitment to staying at the forefront of tech adaptation within the banking sector.

But how is ICICI Bank harnessing tech to grow its businesses?

A notable example of ICICI Bank's successful utilization of technology is evident in its MSME (Micro, Small, and Medium Enterprises) business. The bank has strategically expanded its operations in SME and business banking, with these sectors accounting for 4.4% and 6.7% of its loan book, respectively, as of September 2022. To facilitate this expansion, ICICI Bank introduced the InstaBIZ mobile app in 2016, originally known as iBizz.

InstaBIZ caters to the specific needs of self-employed individuals, SMEs, and the merchant ecosystem. The app offers a range of solutions, including secured working capital, overdrafts on bank fixed deposits, and more. Over the years, ICICI Bank has continually enhanced and revamped the InstaBIZ app, resulting in significant benefits. By September 30, 2022, the app had attracted 195,000 registrations from non-ICICI Bank account holders, showcasing its appeal and widespread adoption among businesses.

ICICI Bank's retail banking vertical has experienced substantial growth, fueled by its strategic integration of technology. The mortgage lending business, constituting 63% of the bank's retail loans with a total book value of INR 3.18 lakh crore (~$40B), has undergone a complete digital transformation. The introduction of the 'iLens' platform in November 2022 has revolutionized the mortgage lending process.

'iLens' is a cutting-edge platform that offers seamless customer onboarding with minimal data input requirements. Leveraging API integrations, it facilitates digital credit assessment by tapping into various data sources. The platform also incorporates video KYC verification, ensuring a secure and streamlined process. Moreover, borrowers can utilize the built-in customer interface to track the status of their loan applications in real-time, digitally complete necessary paperwork, and make fee payments. Notably, even individuals without prior accounts with ICICI Bank can avail themselves of the benefits provided by 'iLens'.

ICICI Bank plans to extend the application of 'iLens' to auto and personal loans in the near future. Auto loans, accounting for 14.3% of the retail loan mix with a book value of approximately INR 72,618 crore (~$9B), will soon benefit from this digital platform. Furthermore, ICICI Bank's front-end mobile app, iMobile Pay, which offers a comprehensive range of 330 features, has garnered attention from non-bank customers. The bank leverages the data collected through iMobile Pay to cross-sell products effectively. Presently, payment services, accounts, and cards are the primary use cases for ICICI Bank's customers, while non-bank customers frequently use the app for UPI and payment services. By December 2022, 8.7 million non-ICICI Bank customers had registered and explored the functionalities of the iMobile Pay app.

Meanwhile, personal loans have emerged as the second-largest contributor to ICICI Bank's retail business, accounting for 14.7% with a loan book of Rs 74,335 crore ($9-10B). This segment is experiencing rapid growth. Additionally, the bank's credit card division, comprising 6.6% of the retail loans mix and a card base of 10 million, has expanded through co-branded partnerships. Collaborations with retail giant Amazon's Amazon Pay and travel portal MakeMyTrip have facilitated the growth of the credit card business.

ICICI Bank has identified large corporates as another significant area of focus for its technological advancements. To cater to the unique requirements of corporate clients, the bank has developed over 20 industry-specific digital solutions. These solutions are designed to enhance various aspects of corporate operations and relationships.

The bank's digital banking solutions provide a comprehensive suite of services to corporate clients, including channels for conducting transactions, managing accounts, and accessing banking services. Additionally, ICICI Bank offers tailored solutions for channel partners, dealers, vendors, and employees, enabling seamless digital interactions and enhancing efficiency in business processes.

The Future

ICICI Bank's commitment to technology is set to continue as it recognizes the indispensability of technological advancements in the current digital era. Sandeep Batra, Executive Director of ICICI Bank, emphasizes the necessity of technology for survival in this digital phase. The bank anticipates its tech investments to remain substantial in the near future.

One of the areas ICICI Bank is focusing on is lightening the load of its core banking solution (CBS). The goal is to enable faster and more efficient customer service by reducing reliance on CBS for routine tasks such as providing bank statements. The bank is also working towards a shift from a product-centric IT architecture to a customer-centric one. This transition involves developing a comprehensive view of each customer's financial relationships to enable real-time data analytics and provide more personalized and relevant services.

ICICI Bank is also actively engaging with start-ups through a partnership model. The bank has made investments in 19 start-ups, recognizing the value of collaborating with innovative and agile companies to drive its technological advancements and explore new business opportunities.

The bank's strategic shift towards a greater focus on retail loans has resulted in a more secure loan portfolio. By leveraging proprietary data, conducting thorough bureau checks, and pricing loans appropriately based on risk, ICICI Bank has significantly reduced its non-performing assets (NPAs). The retail loan book, which is backed by strong underwriting practices and diversification within the retail segment, ensures minimal delinquencies.

As ICICI Bank remains committed to technological innovation and customer-centric approaches, its ability to harness the power of technology, build robust partnerships, and strengthen its retail loan portfolio bodes well for its future prospects and further growth in the banking sector.

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Peeyush and Mohit

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual.